Legal Process: Steering through the uncertain economic climate

The present economic meltdown has crashed many major financial institutions of the Wall Street. With the colossal collapse of financial giants, like Merrill Lynch, Lehman Brothers and Washington Mutual, the banking and financial crisis deepened in Europe and other parts of the world. Just when the U.S economy is trying to find some relief through outsourcing, the strictures of World Bank against SATYAM, one of the greatest IT and outsourcing companies in India, on the ground of moral turpitude came as a huge blow.

Although a ban was imposed on Wipro in 2007 by the World Bank but it was only after the fiasco of Satyam Computers that Wipro decided to make it public. Along with Wipro, Megasoft, another IT company of India and Gap International and Nestor Pharmaceuticals also faced World Bank’s fury. All these questioned the authenticity of corporate governance of India and brought it under scanner. Added to this is the change of guard in U.S that threatens outsourcing of jobs offshore. The change at the White House has brought in President Obama’s popular debate on the business viability of outsourcing. But this does not read any misfortune for the LPO industry of India. In August 2008, the American Bar Association (“ABA”) Standing Committee on Ethics and Professional Responsibility issued a formal opinion (also referred as the Formal Opinion 08-451) in support of U.S. lawyers outsourcing their legal work offshore, provided they adhere to the set rules.

Prior to that The Bar Committees of Los Angeles County, New York City, San Diego County and the Bar Association of California have declared that U.S. lawyers can outsource their legal work off the US boundaries and to the extent of their liability under Attorney-Client privileges. Hence the LPO industry of India can expect a huge inflow of legal work even during this downturn. The Process of Outsourcing has become one of the preferred and cost–effective tools for the U.S law firms and Attorneys.

Considering the huge difference in cost between attorneys in U.S. and that in India, it is obvious that the U.S corporate will cling to outsource their legal services in an attempt to gain profitability during a situation of economic crunch. The downturn has also given rise to new forms of business, like: Corporate Compliance, Customer Guidance Work and of course Risk and Conflict Management.

The LPO industry in India today involves high end niche area services related to Corporate and Regulatory Compliance, Corporate Governance, Contract Review and Management and Intellectual Property. Interestingly, a major part of these works are coming from U.K and U.S, where the cost of litigation is very high. Of course the driving factor here is the uncompromising quality of Indian LPO-producing quality work product at a much competitive price.

LPO Industry: The Future is Here

National Association for Software and Services Company (NASSCOM) in its report, describes Legal Process Outsourcing as “the next big thing” to happen to India, as far as the outsourcing industry is concerned. In a very recent article titled “Thought Leaders” by Reena Sengupta and Paul Solman, published by the Financial Times (London) in their 2008 annual issue of “Innovative Lawyers” states,

“The trend that is having the most impact on the thinking of the partners at top law firms is the impact of globalization and its intersection with people and technology. In particular, the way in which legal work is resourced and the location in which it gets done is coming under greater scrutiny. Outsourcing to India was the theme of many top-ranked submissions both from company legal departments and private practice”.

Approximately one-fourth of the top U.S. companies today have shown their concern on the ever mounting cost of litigation and other legal expenses that virtually takes away a large chunk of their annual corporate spending and is surely a concern on account of their profitability. It is quite obvious that they would start to look for some viable alternatives and conclude outsourcing both for their low and high end process as most cost effective without compromising for the quality of work. The difference in wages of an Indian attorney and that in U.S. and U.K. affirms this fact; an Indian attorney charges almost 80 per cent less than his U.S. or U.K. counterparts.

Several factors encouraged the growth of LPO in India. The graph of the development of LPO in India reveals a result that is overwhelming and why not? The legal system in India and the usage of English as the medium of instruction at our Law Schools, coupled with a solid Common Law background that we posses, provides an ideal knowledge and resource structure that has helped us gear for the substantial growth in the LPO spectrum. Hence with a minimal training, it has been possible for our Indian lawyers to deliver high quality legal work product. India is thus all set to complement the LPO wave.

From the Indian perspective, the legal work outsourced to India might only constitute 2 per cent of the global legal spending, which is valued at US$ 80 million. In its recent surveys Forrester Research speculates that in the coming years, the LPO market in India will see a tremendous surge of legal work that would be outsourced to the country and that may in turn generate huge job opportunity for our law graduates and this demand is slated to grow up to 35,000 job opportunities by the year 2010 and further taking it up to 79,000 opportunities by 2015.

The U.S. corporate sector holds great opportunities for the LPO of countries, like India. The need for legal advice is high and we can certainly assist them with the required back-end support. It need not be mentioned that the possibilities of this industry are immense. We have entered the era of Legal Process Outsourcing. It’s time for us to witness the change it brings in the outsourcing industry.

Challenging Trends in LPO Industry

Outsourcing has been there for more than two decades. Some say that the process of Legal and Knowledge Outsourcing has been an intrinsic business offshoot when the regular and high end Business Process work was low or completely dried up. However, this is not the sole reason why LPO is considered a green pasture for the existing and upcoming service providers. What has made LPO business lucrative is the cost benefits and effectiveness of knowledge intensive high-end work. Best utilization of people assets is an essential strategy. With markets tightened and volatile, companies have relied much on acquisitions to drive growth and to this extent outsourcing has turned out to be a proven tool for improving services and containing their ever increasing operating costs.

The University of NSW survey has considered the three distinct categories of cost, innovation and risk factors as drivers for outsourcing and established their relevant importance in the decision making process. Law firms have finally woken from their slumber to face the reality that there are increasing array of legal work to be outsourced offshore. The exorbitant hourly rates simply do not wash any more with clients when it comes to routine level legal support work. Outsourcing their legal work has surely taken away the burden of ever increasing and nightmarish litigation and legal costs off the shoulders of Corporate Americans. On the other hand outsourcing their legal work has helped the U.S. attorneys and law firms reduce their establishment and professional costs without compromising on quality and professional timeline that is the foremost concern in the legal business. The New York, Florida and San Diego Bar associations have all concluded that subjected to certain safeguards there is no reason why a law firm cannot outsource offshore both support and higher value legal work.

Considering the high margins of profit, some of the big players of the industry are showing their affinity to tap these markets as well. Needless to say, that the technology plays a significant role in outsourcing offshore. It has a two-fold effect. Firstly, it enables the performance of increasingly more complex legal tasks at the simple push of a button and secondly, it has opened a vast pool of common law trained legal talent internationally, who are now available to assist law firms and legal departments in the U.S. and the U.K. Today legal outsourcing is considered a management strategy, very crucial to the corporate output and practice sustainability. It has matured much beyond purely cost reduction to a flexible business model and drive innovation. A recent study by PricewaterhouseCoopers, "Outsourcing comes of age: the rise of collaborative partnering", showed that three quarters of worldwide organizations say access to talent is an important or very important reason why they outsource. Last year we saw some crucial level of VC investment enabling the world's largest BPOs to enter the legal outsourcing business that has placed legal outsourcing companies in the scaled up position.

It is difficult to find a composite of legal aptitude in every law student. Hence the LPO companies are required to diligently impart training following similar methodologies and rigor to maintain quality control. In India the list of LPO players includes on the top, companied like LawScribe, Pangea3, or Quislex, to name a few are the market leaders. The advantage that they utilize in their favor are a band of skilled attorneys and paralegals training resources, legal tools, stability of their on-site office location and wide access to world wide legal research platform, which makes them trust worthy for the clients/law firms.

Apart from the United States and U.K., the most mature outsourcing region in Europe is Scandinavia, with Norway and Sweden the undisputed leaders. Language sensitivity is one reason why European companies often choose near shoring as compared to off shoring. There are, for example, many outsourcing suppliers in Romania and Northern Africa who offer services in French. In Germany, people largely prefer shared services, although outsourcing is popular in the manufacturing industry. That is now gradually being reversed. Legal Outsourcing too is a management science and the issue that is crucial here is one of change management for sure, lawyers historically are not the best managers. The issues pertaining to performance metrics and benchmarks may sound as Hobbit terms to most attorneys.